High Court Of Madhya Pradesh : Indore Bench
Smt. Harbans Kaur Bhatia vs. CIT
Section 112, 113, 158B(b), 158BA(3), 158BD
Asst. Year 1996-97
A.M. Sapre & Ashok Kumar Tiwari, JJ.
IT Appeal No. 29 of 2000
3rd January, 2005
Counsel Appeared
S.C. Bagadia with D.K. Chhabra, for the Assessee : R.L. Jain with Ku. V. Mandlik, for the Revenue
ORDER
A.M. Sapre, J. :
This is an appeal filed by the assessee under s. 260A of the IT Act against an order, dt. 20th June, 2000, passed by Income-tax Appellate Tribunal, Indore (for short hereinafter referred to as “Tribunal”) in IT(SS)A No. 19/Ind/1998. The appeal was admitted for final hearing on the following substantial question of law:
“Whether, in the facts and circumstances of the case, a notice under s. 158BD of the IT Act could have been issued and was justified to the appellant, despite the fact that return for the relevant asst. yr. 1996-97 showing the receipt ofRs. 6.66 lakhs from sale of plot had already been filed and tax liability on the same was also met?”
Facts necessary for the disposal of the appeal need mention in brief to appreciate the issue sought to be raised in this appeal. A search operation was conducted under s. 132(1) of the IT Act in the residential premises of Shri Kripal Singh Bhatia, the husband of assessee on 1st Feb., 1996.
In this raid operation, it was revealed that assessee, i.e., wife of Kripal Singh Bhatia had purchased one land measuring 0.70 acres at Piplierao jointly along with two other ladies of family, i.e., Smt. Veena Bhatia and Smt. Gurucharan Bhatia in the year 1988-89 for Rs. 2,35,200. In this sale, the share of assessee was of Rs. 78,400. This land was shown to be sold by trio on 2nd Jan., 1996 for Rs. 9,00,000 being the price mentioned in the sale deed and received by cheque. However in the raid operation, it was discovered that, in fact, the land was sold for Rs. 29,60,000 and not for Rs. 9 lakhs and a sum of Rs. 20,00,000 were received by trio, i.e., by assessee and other two, in cash in instalments on various dates through their power of attorney holder—Mr. Kripal Singh Bhatia (husband of assessee) over and above Rs. 9 lakhs. In other words, the entire sale transaction was for Rs. 29,60,000 whereas assessee in sale deed mentioned the sale price to be only Rs. 9 lakhs and shown this Rs. 9 lakhs to have been received by cheque towards entire sale consideration.
On 13th Dec., 1996, the assessee filed her regular return under s. 139 ibid for the asst. yr. 1996-97. In this return she disclosed her total income at Rs. 8,84,380 being her 1/3rd share of sale consideration. In the return, she said that she has received a sum of Rs. 6,66,666 in cash which was detected in course of search operation.
On 8th Aug., 1997, the AO issued a notice under s. 158BD to assessee calling upon her to file return under Chapter XIV-B. A notice under s. 142(1) was also issued. The assessee on 11th Sept., 1997 filed the return for the block period and disclosed her income at nil.
In block assessment proceedings, out of which this appeal arises, the contention of assessee was that, since the consideration was received on sale of capital asset (land), the assessee is liable to pay capital gains by paying tax at the rate of 20 per cent. It was also contended that since the income was not undisclosed and hence, the tax cannot be charged at the rate of 60 per cent as per s. 113 of IT Act which is applicable only to return of income disclosed under s. 158BC, i.e., block period assessment. The contention of assessee did not find favour either to AO or to Tribunal in an appeal filed by assessee against the order of AO it is against this order of Tribunal, the assessee has come up in appeal under s. 260A ibid. Heard Shri S.C. Bagadia, learned senior counsel with Shri D.K. Chhabra, learned counsel for the assessee and Shri R.L. Jain, learned senior counsel with Ku. V. Mandlik, learned counsel for the Revenue.
Having heard learned counsel for the parties and having perused record of the case, we are of the view that this appeal has no merit.
In our opinion, the issue involved in this appeal has to be examined in the light of two provisions of the Act. They are s. 158B(b) which defines the word “undisclosed income” and s. 158BA(3). They read as under:
“Sec. 158B(b)—”undisclosed income” includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other documents or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act. Sec. 158BA(3)—Where the assessee proves to the satisfaction of the AO that any part of income referred to in sub-s. (1) relates to an assessment year for which the previous year has not ended or the date of filing the return of income under sub-s. (1) of s. 139 for any previous year has not expired, and such income or the transactions relating to such income are recorded on or before the date of the search or requisition in the books of account or other documents maintained in the normal course relating to such previous years, the said income shall not be included in the block period.”Perusal of definition of undisclosed income would show that it not only includes within its sweep, property which has not been disclosed by an assessee in his/her return but it also includes within its fold that property which would not have been disclosed for the purpose of this Act by the assessee. Sec. 158BA(3) applies to those cases where some part of income, which is or can be made subject- matter of block assessment, relates to an assessment year for which its previous year has not ended or the date for filing the return of income under s. 139(1) for any previous year has not expired. In such situation, if such income or transactions relating to such income are recorded on or before the date of search in the books of accounts or other documents maintained in the normal course relating to previous years, then the said income shall not be included in the block period provided AO records its satisfaction on assessee’s proving with reference to the requirement stated supra. Conjoint reading of aforesaid two sections would, thus, make it manifestly clear that, in order to take out any income or transaction out of the clutches of block period, it is for the assessee to prove to the satisfaction of AO that a particular income/transaction had already stood recorded in the books of account/documents in the normal course of business by the assessee prior to the date of search or their requisition. What is, therefore, material is its disclosure in the books of account and secondly, such disclosure should be prior to the date of search in point of time. In such circumstances, if an assessee has not filed his/her regular return under s. 139(1), even then it would not make much difference because the assessee has already taken care to disclose the income/transaction in his/her books of account the day it was required to be entered into in accordance with accountancy system. It is, as already mentioned supra; subject to the condition that entry must be made prior to the date of search and not subsequent to it. The object underlined in sub-s. (3) is very clear. If the intention of assessee is to pay normal rate of tax, he would disclose all the income/transaction in his/her books of account. But if his/her intention is to evade the tax, then he/she would not disclose the income/transaction in his/her books of accounts thereby will enjoy the income without paying any tax on it. It is only when he/she is subjected to search operation, he/she would make entry in his/her books subsequent to date of search to avoid higher rate of tax at 60 per cent. Such entry, i.e., an entry made subsequent to date of search is of consequence. It is for this reason; the words used in s. 158B(b) “would not have been disclosed” are very significant. This clearly has a nexus with the intention of assessee in dealing with his/her property. Now, coming to the facts of this case, the assessee has not tendered her books of accounts or any document maintained by her in normal course of her business/professional activities as contemplated under sub-s. (3) of s. 158BA before AO. The assessee, in fact, did not file any kind of evidence before AO which would have proved that income which she has disclosed in her regular return was already recorded in her books of account prior to the date of search. When it was her case that she received some amount in cash in addition to cheque, then it was incumbent upon her to have disclosed that receipt of cash amount which she has disclosed in her return, was already entered in the books of account prior to the date of search, i.e., 1st Feb., 1996. It is only then the assessee would have been able to take benefit of sub-s. (3) so far as her income of Rs. 8,84,380 was concerned. This amount would have been then held to be an income from known sources thereby not being regarded as income from undisclosed source within the meaning of s. 158B(b) of the Act.
In our opinion, thus, it was a clear case of income from undisclosed source in the hands of assessee as defined under s. 158B(b) ibid. It is clear from the fact that firstly, the sale deed recited a sale consideration of Rs. 9 lakhs. Secondly, only a sum of Rs. 9 lakhs was shown to be received by cheque. Thirdly, the balance amount of Rs. 20,60,000 received in cash was not entered in the books of account of any of trio, nor was anywhere disclosed in any document such as bank account or in wealth-tax returns or in the form of issuing a receipt in favour of purchaser against sale consideration by any of the trio including the assessee to the extent of her 1/3rd share of Rs. 6,66,666. In this view, the intention of assessee was not to disclose receipt of Rs. 20,00,000 or her 1/3rd share out of Rs. 20,00,000, i.e., Rs. 6,66,666 in her income for the year in question. It was thus a clear case which falls in the wordings of s. 158B(b) i.e. “would not have been disclosed for the purpose of this Act.”
In this view of the matter, the income in question had to be taxed in the hands of assessee as per provisions applicable to block assessment r/w s. 113 of the Act treating the income to be an income from undisclosed one as defined under s. 158B(b) ibid.
Accordingly and in view of foregoing discussion, we are of the view that no fault can be found in the conclusion arrived at by the AO and that of Tribunal. Though we uphold their eventual conclusion, but we do so on our own reasoning which we have arrived at on interpretation of relevant sections referred supra. In fact, Tribunal should have examined the case legally on these lines rather than on simple facts and that too without taking recourse to any of the legal provisions which are applicable to the facts of this case.
Appeal, thus fails and is accordingly, dismissed. No costs.
[Citation : 274 ITR 298]
